‘A Price-Fixing Cartel Waiting to Happen’

MINNEAPOLIS (CN) – DuPont and three other companies conspired to fix prices on titanium dioxide, a billion-dollar chemical used in white paint, plastics and paper, the paint company Valspar claims in court. Valspar sued DuPont, Huntsman International, Kronos Worldwide and Millennium Inorganic Chemicals, in Federal Court. Valspar claims: “Defendants and other non-party co-conspirators intentionally conspired and agreed to manipulate, fix, raise, maintain, and stabilize the market and price at which Titanium Dioxide is sold in the United States.” A primary ingredient of white paint, titanium dioxide also is used to make paper, plastics and cosmetics white; titanium dioxide products are a multibillion-dollar industry. The four defendants “own and supply more than 90% of the United States’ demand for titanium dioxide,” Valspar says in its lawsuit. Valspar states: “Defendants’ unlawful conspiracy was initiated, developed, and maintained by a course of anticompetitive conduct, including agreements, secret meetings and communication between and among defendants and their co-conspirators for the purpose of artificially inflating the price of titanium dioxide and allocating the United States marketplace. While in secret discussions, defendants exchanged commercially sensitive and proprietary information relating to the sales, production, supply, inventory, marketing and pricing of titanium dioxide, as well as the raw materials necessary to manufacture titanium dioxide itself.” Valspar opted out of two class actions against DuPont: Haley Paint Co. v E.I. DuPont, filed Feb. 9, 2010 in Baltimore Federal Court; and Los Gatos Mercantile et al. v. E.I. DuPont, filed March 15 this year in San Francisco Federal Court. Valspar claims the conspiracy forced it to overpay for titanium dioxide. The lawsuit describes the titanium dioxide industry as “a price-fixing cartel waiting to happen.” “The titanium dioxide industry has high barriers to entry,” the complaint states. “For example, a new ‘greenfield’ one-hundred kilotons-per-year plant has been estimated to cost approximately $450-$500 million, and require a three-to-five-year lead time to build. The defendants also have cost advantages and proprietary technologies that effectively deter new entrants. Such barriers are conducive to a conspiracy because they protect existing suppliers from competition and maintain the high concentration of the titanium dioxide industry. … “Industries like the Titanium Dioxide industry, with few sellers facing similar costs, low substitutability, competition primarily based on price, and high barriers to entry are particularly susceptible to price collusion. Succinctly stated, the titanium dioxide industry has all of the characteristics of a price-fixing cartel waiting to happen. This set the stage for an unlawful conspiracy to manipulate, fix, maintain, and stabilize the price of titanium dioxide which began to impact industry pricing on or shortly before 2002.” Valspar seeks an injunction and penalties for restraint of trade, price-fixing and unjust enrichment. It is represented by James Lockhart with Lindquist & Vennum.